Friday, July 02, 2004

And the next fight will be ... about the budget

If the EU leaders think that they can now enjoy their summer holidays, having managed various compromises on the Constitution and the Presidency, they can think again. Even before the European Parliament starts mewling about the new Commission (it rarely does anything else), there will be the question of the Commission proposals for financial reform.

This will have nothing to do with the Lisbon process or the need to make the European economy the strongest and most competitive in the world but with the financing of the EU. In other words, the fight will be real and bloody because it will be about the money that is to be handed over by member states to the Union.

Romano Prodi, the outgoing President is due to present the Commission’s plan in two weeks’ time on how the EU should fund itself in the next period under discussion: 2007 – 2013.

(In parenthesis, we may note yet again that one reason why the EU manages to push its plans through unchecked is because it thinks in managerial rather than political terms. Its political ideas are founded on five year plans a long way ahead. They are not disturbed by elections and possible changes of ruling parties, for they do not alter the legislative and regulatory process; nor are they affected by the need for an annual presentation of the budget to Parliament for that is not how the financing operates.)

Signor Prodi is threatening his colleagues with “radical ideas”, about the most dangerous term one can use in the EU. However, the last time he had “radical ideas” – in February of this year, to be precise – he was attacked by all the net contributors as he suggested that contributions should be raised. At a time of economic recession this was not a popular idea. (To be fair, this would not be a popular idea at any time.)

Now, he seems to have hit on something else. Britain’s rebate, won with some handbagging by Mrs Thatcher in 1984, according to Prodi, belongs to a different era in European history and should be stopped. Instead, there should be a, no doubt extremely cumbersome, system of “generalized correction mechanisms”, whereby any country that reaches a certain level of contribution, should have a rebate. We shall have to see how these mechanisms are supposed to work but those who suspect that they will create a great deal more bureaucracy are probably not far wrong.

Meanwhile, in another corner of the battlefield, there is a some squaring up going on between the UK and the Netherlands. Each Prime Minister maintains that it is he and he alone who won the important concession that EU budget rules can be changed only by unanimity even if the Constitution is implemented.

For Tony Blair much of that is to do with the need to hang on to the rebate as a badge of honour. The Dutch Prime Minister, on the other hand, is talking about the need for a general cap on contributions. He is not likely to be sympathetic to the British case. As the Financial Times put it on July 1:

Jan Peter Balkenende, Dutch prime minister, said his country was fed up with being the biggest per capita contributor to the €100bn annual EU budget and that the whole system of EU financing needed to be reviewed.
Mr Balkenende said Dutch citizens paid six times more into the EU budget, which funds agricultural subsidies, regional aid and other programmes, than their French counterparts.

Nor will there be much sympathy from Germany, the largest net contributor or, in this case, from the much poorer new member states, some of whom, by a freak of accounting, are also net contributors at the moment. Will Mr Blair find that unanimity does not necessarily mean that when a consensus is needed? Watch this space.